Pioneer Foods punished for cartel conduct

A financial settlement has brought an end to a long-standing cases against South African Pioneer Foods over its conduct in the wheat, maize, poultry and eggs market.

Pioneer will reduce the sale price of bread and flour products by a total of R160 million (€16.5m) as part of a R1.05 billion (€108m) settlement reached this week in its price-fixing cases, Economic Development Minister Ebrahim Patel said.

In a speech in the National Assembly, Patel announced that in addition to paying R445 million (€45.8m) of penalties, the 90-year-old company also had to pay R250 million (€25.7m) into the National Revenue Fund and to increase its planned capital expenditure of R1.2 billion over the next two years by a further R150 million (€15.4m).

Largest settlement

It is the largest settlement in the history of the Competition Commission involving a single company and is expected to be confirmed by the Competition Tribunal soon, Patel told MPs.

The penalty is also the biggest ever imposed on a single company.

Patel said the case proved that it was becoming harder for companies to get away with anti-competitive behaviour.

"Vertically integrated firms in the milling and poultry markets leverage their control of critical inputs like wheat and poultry feed to exclude other firms or to sustain cartel arrangements.

"For this reason, both structural and behavioural measures are important to bring new players into the value chain. This new pro-active stance of the competition authorities, coupled with a strong investigative capacity, makes it harder for companies to escape with anti-competitive conduct."

Government will monitor compliance with the subsidy, and ensure that the price reductions benefit ordinary consumers, he said.

Denial at first

Pioneer initially denied any wrong-doing and resisted a settlement, while smaller competitors Tiger Brands and Premier, co-operated with the commission and divulged information about collusive behaviour.

Patel signalled shortly after his appointed to Cabinet that government would cast a spotlight on anti-competitive behaviour, in particular in the local food market.